Indiegogo mulls equity crowdfunding, but only if rules won’t ‘stifle innovation’ - Crowdfunding Planning explains

posted Jun 24, 2013, 11:10 AM by   [ updated Jun 24, 2013, 11:21 AM ]
Indiegogo mulls equity crowdfunding, but only if rules won’t ‘stifle innovation’As Canadian entrepreneurs wait for regulations in the works that could allow them to use crowdfunding to seek equity investment from the general public, one of the most popular platforms available in Canada says it may opt out of equity crowdfunding if the new rules are too stringent. Danae Ringelmann, co-founder of Indiegogo, said she is “excited” about equity crowdfunding, but her organization may not pursue the option if rules handed down by U.S. and Canadian authorities are too rigid to allow her platform to adapt its implementation or that could “stifle innovation.”

“If the regulations are done in such a way that we are not able to experiment, we might not be able to make a business case to do it… We hope that the regulations will come out in a way that, yes, will protect us against another 2008, because we don’t want that,” Ms. Ringelmann said in a phone interview. “But don’t over regulate because that would stifle innovation.”

Indiegogo is waiting for the regulations to be finalized before making a decision to push forward, she said.

Investment crowdfunding has been touted by proponents as a promising solution for small and medium-sized businesses facing difficulties raising equity through public markets. But its implementation has been delayed amid growing debate over what is needed to properly protect investors, or if it is viable at all. Critics of equity crowdfunding say it leaves naive investors vulnerable to losing money on overly risky investments or fraud.


The idea of investment crowdfunding gained traction in the United States last April when President Barack Obama signed the Jumpstart Our Business Startups (JOBS) Act, which would allow non-accredited or non-sophisticated investors to buy small equity stakes in companies without the business of going through the costly process of preparing a prospectus for a public listing.

It’s been six months since U.S. regulators missed their deadline to issue provisions for equity crowdfunding. Meanwhile, the Ontario Securities Commission is in the process of seeking input on whether to allow some form of crowdfunding where small contributions from a large number of investors are pooled in exchange for securities.

Ms. Ringelmann said Indiegogo has been in touch with both Canadian and U.S. authorities through this process. The company has been in talks with the U.S. Congress, even before the JOBS act, and spoke with the OSC a few months ago about Indiegogo’s approach to crowdfunding.

Indiegogo has also recently introduced measures to make it easier for Canadian entrepreneurs to crowdfund, including allowing startups to raise money in Canadian dollars, campaign in French on the platform, and most recently, to accept credit card payments in Canadian dollars as well. (On crowdfunding platform Kickstarter, officially only U.S. or U.K. entrepreneurs are eligible to start campaigns.)

In the coming weeks, Indiegogo is also hosting workshops in Toronto and Montreal to help cash-strapped entrepreneurs campaign effectively.

Canada is Indiegogo’s second biggest market, outside of the U.S., and the number of active campaigns in the country in March were 213% higher than the year earlier, the company said.

One prominent, and controversial, campaign was the so-called “Crackstarter” to raise $200,000 to purchase a video allegedly showing Toronto Mayor Rob Ford smoking crack cocaine from men involved in the city’s drug trade. The campaign started by New-York based gossip site Gawker surpassed its goal, with the help of more than 8,000 funders. But the video’s sellers were no longer reachable to complete the sale, and the raised funds will instead be directed to charity.

The campaign drew criticism for funneling money to admitted drug dealers, but Ms. Ringelmann said Indiegogo “never received one complaint from the community or even the mayor’s office.

“The campaign was quite popular and so there was a clear interest, whether or not the mayor engaged in certain behaviour… but this is actually a great example of a crowdfunding campaign working, where people have the ability to vote with their dollar.”

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